ECJ decided today also on a reference concerning assessment by the national court of its own motion whether a contractual term conferring jurisdiction is unfair in respect of the Directive 93/13/EEC on unfair contract terms.
Opinion of the Advocate General has been previously discussed here.
The facts of the case were as follows: Mr Schneider concluded a loan with Pénzügyi Lízing to finance the purchase of a car. When Mr Schneider stopped paying the loan back, Pénzügyi Lízing terminated the contract and brought a case before court demanding repayment of a debt with interest. Pénzügyi Lízing brought an application for a payment order before the court to which jurisdiction has been conferred in the loan agreement and not the court corresponding to the place where Mr Schneider lived. The payment order was issued without the parties having to enter into proceedings. Upon appeal by Mr Schneider (who did not mention any ground for that appeal), when the parties entered into proceedings, the court realized that Mr Schneider did not live within its territorial jurisdiction and questionned the fairness of the contractual term conferring jurisdiction.
Proceedings in this case has been stayed until Pannon case (C-243/08) was decided. In Pannon case ECJ answered some of the questions of the Hungarian court. However, upon Pannon case was decided, the Hungarian court referred a few other questions to the ECJ, asking for more explanations.
One of these additional questions asked was, whether the jurisdiction of the ECJ extends to the interpretation of the concept of 'unfair term' and to the criteria which the national court may or must apply when examining a contractual term in the light of the provisions of the Directive.
ECJ, in his answer, reminded that:
"Article 3 of the Directive merely defines in a general way the factors that render unfair a contractual term that has not been individually negotiated, that the Annex to which Article 3(3) of the Directive refers contains only an indicative and non-exhaustive list of terms which may be regarded as unfair and that Article 4 of the Directive provides that the unfairness of a contractual term is to be assessed taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of it." (Par. 42)
ECJ stated therefore, that while it has jurisdiction to the interpretation of the concept of 'unfair term' and to the criteria which the national court may or must apply when examining a contractual term, it leaves to the national court to determine, in the light of those criteria, whether a particular contractual term is actually unfair in the circumstances of the case.
Further questions referred to the ECJ sought to establish responsibilities of the national court, from the time when it begins to consider whether a contractual term conferring exclusive territorial jurisdiction may be unfair. Whether the national court is obliged to undertake, of its own motion, an investigation with a view to establishing the factual and legal elements necessary to assess whether a term is unfair, where the national procedure rules permit that only if one of the parties so requestes.
In her opinion the Advocate General stated here that there is no general obligation for the national courts to examine the unfairness of the contractual terms of their own motion. She mentioned that the national courts would have to assess unfairness of contractual terms only in case there would be an indication of possible unfairness on the basis of the arguments of the parties or other circumstances. The ECJ does not repeat this argument, however.
ECJ made it clear that the Directive's aim is to protect the consumer as a weaker contractual party, both on account of his weaker bargaining power and his level of knowledge. (Par. 46) It is because of that weaker position of the consumer that Art. 6(1) of the Directive provides that unfair terms are not binding on the consumer. This is a mandatory provision which aims to replace the formal balance which the contract establishes with an effective balance which reestablishes equality between the parties. (Par. 47) That imbalance between consumer and the professional party may be, according to the ECJ, corrected only by positive action unconnected with the actual parties to the contract. (Par. 48) Therefore:
49 Thus, in the exercise of the functions incumbent upon it under the provisions of the Directive, the national court must ascertain whether a contractual term which is the subject of the dispute before it falls within the scope of that Directive. If it does, that court must assess that term, if necessary, of its own motion, in the light of the requirements of consumer protection laid down by that Directive.
50 As regards the first stage of the examination to be carried out by the national court, it appears from Article 1 in conjunction with Article 3 of the Directive that it applies to any term conferring exclusive territorial jurisdiction which was not individually negotiated appearing in a contract concluded between a seller or supplier and a consumer.
51 In order to safeguard the effectiveness of the consumer protection intended by the European Union legislature, the national court must thus, in all cases and whatever the rules of its domestic law, determine whether or not the contested term was individually negotiated between a seller or supplier and a consumer.
After giving these guidelines as to the first stage of the test, the ECJ reminds that as far as the second stage of the test is concerned (assessment of the unfairness) that has been already explained in its verdict from the Oceano case (C-240/98) stating that a term conferring territorial jurisdiction must be regarded as unfair in so far as it causes, contrary to the requirement of good faith, a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer. (Par. 53)
The ECJ concluded here categorically that the national court must investigate of its own motion whether a term conferring exclusive territorial jurisdiction in a contract concluded between a seller or supplier and a consumer, which is the subject of a dispute before it, falls within the scope of the Directive and, if it does, assess of its own motion whether such a term is unfair. (Par. 56)
It is interesting to see that the ECJ ignored prepared by the AG arguments on the 'legal and factual elements necessary' to assessing the unfairness of a contractual term of the court's own motion. It gives the impression that the ECJ wanted to ensure the high level of consumer protection against unfair contract terms despite national courts' worries that had been expressed after publication of ECJ's earlier judgments. Whenever a court receives a copy of the contract in which there is a clause conferring territorial jurisdiction, that national court is obliged to inquire whether that clause had been individually negotiated and if it had not been, then it has to assess its fairness. The national courts have to some legwork here. They are not allowed to wait until the parties point out the jurisdiction clause in the contract or until it is being brought to their attention otherwise. They have to check whether such a clause was added to the contract and what was its status.